Are you considering growing your construction business this year? Are you planning to expand your company further to territories and distinct markets? Whether you are just a start-up or have been managing construction projects for decades, evolving your business requires meticulous planning.
The key to successful planning in expanding your business? Understanding the misconceptions regarding growing a business and incorporating proven techniques to help you along the way.
Let’s dive into it.
Common Misconceptions in Growing a Construction Company
There are three usual misconceptions that construction entrepreneurs should be informed of when either growing an existing business or even starting from scratch.
1. You Need A Big Capital to Start
One of the most significant recognized barriers to starting a construction company is the amount of capital required. However, in reality, many successful businesses get started with a surprisingly small sum of money. According to new research, 39 percent of landscaping and construction business owners said they started their own companies with less than $5,000 in their account.
While the amount of capital necessary to get started may be lower than expected, properly managing cash flow is essential to growing a company. General and subcontractors should consider billing clients after each small step (or milestone) in a project rather than three or four large installments to encourage more timely, consistent payments. For instance, provide an invoice after demolition, land clearing, window insulation, electrical, plumbing work, etc. This approach will help you receive a steady cash flow. Clients will likely prefer this method of payment as well because it allows them to split up their bills into more manageable sums.
Once a company is established, it’s necessary to consider possible financing options to fund future growth and expansions. It can be difficult for business owners without long credit histories to get accepted for funding, and small businesses are usually overlooked by banks favoring bigger ones seeking larger loans.
Most small business owners have begun switching to online lending platforms that look at and share their live data to get funding approval instead of dated tax returns and old bank statements. These innovations allow for more flexible access to working capital by analyzing a company’s current business performance.
For instance, when a construction business owner in California needed to buy new equipment and hire additional employees, he applied for a small business loan through his bank but only received a portion of what he asked for. Through online lending, he was approved for a flexible credit line that matched his business needs, resulting in the company’s revenue doubling in one year.
2. Construction Industry is Not for People Who Are Unfamiliar with the Industry
Forty-one percent of respondents in a survey started a business in an industry that was new to them. According to a recent study, 82 percent of entrepreneurs did not doubt they had the right qualifications and experience to successfully run a company.
While confidence is critical in most things, no business owner unfamiliar with the construction industry should start it alone. Construction businessmen should find a technical advisor or mentor in their industry who can keep an eye on their long-term goals, help them avoid mistakes, anticipate upcoming expenses and give realistic advice about cash flow concerns. Try connecting with industry networks on LinkedIn or joining a trade association for potential connections for those looking for a mentor.
3. Being a Construction Business Owner Means You are Doing it All
Business success is highly dependent on staying focused on areas that bring in money. The construction business areas where owners had the least amount of experience when they started their company were legal or compliance,
financing or bookkeeping, and marketing or advertising. Outsourcing some of these departments can save time, money, and a lot of stress. To hire reliable and quality contractors, business owners should accept referrals from their peers and engage in best practices to retain talent, especially in the current trend in the construction job market.
Entrepreneurs can benefit from using construction management software for builders and contractors to automate different areas of business operations. Different technology innovations can manage tasks such as inventory management, scheduling, digital marketing, and even customer service. Having the right tools and software can enhance operational processes, increase efficiency, reduce paperwork, and improve worker productivity.
Proven Techniques to Advance Your Construction Business
1. Assemble a Great Team
In the construction industry, your employees are your business. Hire knowledgeable, reliable, and skilled employees. Retain your best people by promoting and rewarding them accordingly for their hard work and reliability.
2. Manage Your Company, but Lead Your Team
Your construction team wants to be led, not managed. Become a great leader, and your team will follow you anywhere because the trust has already been established. If you try and micromanage every aspect of your team’s work, they will assume that you have no confidence in their ability to make good decisions and do their jobs correctly.
3. Invent for your Business Thinking Long-Term
If you want to expand your business and win more projects, you have to invest money and time into your company. This means investing in construction software for small builders and tools for start-up companies when needed, continuously training your employees, and pro-actively marketing your business.
4. Prioritize Quality Over Quantity
Like in most things in life, less is always more. It’s not satisfactory to earn more business- they must be good ones to start with. When you take on more jobs, make sure that it will be profitable for your company. There’s no benefit in doubling the number of projects you work on if you aren’t increasing your profits.
5. Maximize the Power of Word of Mouth
Word of mouth is still considered the number one method most construction companies employ to market their company and earn more projects. Encourage your trusted customers to give referrals and tell others about your company’s excellent work. There is no better way to strengthen the client-owner relationship than this.
6. Know Your Strengths
Here’s a question: Would you rather have your company be famous as a competent all-around general contracting firm in the local area or the best general contractor specializing in LEED-certified residential renovations? Focusing on a niche market or being an expert in a specific industry can set you apart from your competitors in the construction industry.
7. Attend Networking Events to Grow Connections
One of the best ways to build connections is to join your local trade association and be active o it. Networking can be an effective tool to promote brand awareness for your business, gain potential leads, and find potential suppliers and vendors. Staying active and giving back to your local community is also a good networking opportunity for your company, and you can also pay back and help out.
8. Make Quality Your Selling Point
Tread carefully when considering any factor that could compromise the quality of your work. Being too economical and cutting corners to lower costs can be detrimental to your project. Your company’s brand and reputation for doing quality projects are only as good as your last one, so never sacrifice your high standards of performing quality work.
9. Embrace Change
Adaptability is one of the significant elements of success in the construction industry. From what we’ve seen with the recent recession and unprecedented events worldwide, construction can be quite an unstable industry. If you are unwilling to make necessary adjustments quickly in your business to keep up with the ever-changing trends, you are setting your company up for failure.
10. Enhance Customer Service Experience
Pleasing your customers should be a top priority always. This doesn’t imply that you must cave to all their requests and demands. Instead, you should be proactively communicating with your customers on all aspects of a project so you can be partners in the decision-making process as the construction progresses. Satisfied clients will indeed repeat business and helpful referrals.
11. Be Proactive
You can’t simply sit back, relax and expect more projects to fall in your lap. As a contractor, you have to find new opportunities to proactively retain and expand your business. Constantly reach out to the potential clients, designers, and subcontractors and find out what work they have on the horizon you can help with.
12. Make Smarter Decisions
We make thousands of decisions on-site every day, some of which are inconsequential. When discussing getting more projects, this often needs making hard decisions that can further impact your future success. Take as much time to consider all options and angles and conduct your due diligence for success in years to some. Never feel pressured into making impulsive or rash decisions can lead to disastrous consequences.
It’s not enough to commit to growth without keeping track of your progress in a day. This is the only surefire way to mitigate issues and catch them before they snowball for the worst.
Carefully monitor each schedule and task with construction scheduling software and gain a better perspective of your progress, and therefore, help you make better decisions about upcoming projects. This also means you can check in on the productivity of every one of your team members and subcontractors. No slackers, you’re welcome.
The right software and tools can go a long way towards avoiding mistakes and are an excellent place to start project management for construction. Contact Pro Crew Schedule today to learn how our platform solution can help grow your business.